The Impact of Tax Structure on Investment: An Empirical Assessment for OECD Countries

REM Working Paper, 058-2018

13 Pages Posted: 6 Dec 2018

See all articles by José Alves

José Alves

UECE - Research Unit on Complexity in Economics; ISEG - ULisboa; REM - Resarch in Economics and Mathematics

Date Written: November 9, 2018

Abstract

In the present empirical analysis we try to assess the impact of taxation on investment growth. In particular, and by using gross fixed capital formation as a proxy for investment, we intend to evaluate the impact of the taxation structure in investment dynamics, in a short and a long-run perspectives. This empirical exercise was conducted for all OECD countries, during the 1980-2015 period. Through panel data econometric techniques, we find optimal tax-investment threshold values, specially higher for short-term than for long-term evolution. Also, we find optimal income taxation rounding 9%, in percentage of GDP, an average optimal value 12.7% for consumption taxes to promote annual investment growth.

Keywords: Investment Growth; Tax Systems; Fiscal Policy; Optimal Taxation

JEL Classification: D25; E62; H21; O47

Suggested Citation

Alves, José, The Impact of Tax Structure on Investment: An Empirical Assessment for OECD Countries (November 9, 2018). REM Working Paper, 058-2018, Available at SSRN: https://ssrn.com/abstract=3281769

José Alves (Contact Author)

UECE - Research Unit on Complexity in Economics ( email )

ISEG/UTL, Rua Miguel Lupi 20
Lisboa, 1249-078
Portugal

ISEG - ULisboa ( email )

Rua do Quelhas 6
LISBOA, 1200-781
Portugal

REM - Resarch in Economics and Mathematics ( email )

ISEG, Universidade de Lisboa
Rua Miguel Lupi, 20
Lisboa, 1249-078
Portugal

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